Great post from SAO LinkedIn Group : outlines current VC funding mindset…

I found a great post from Mark Lawler on SAO’s LinkedIn Group… outlines notes from a recent VC panel (Silicon Valley) per the current funding mindset.

The text is quoted as follows:

“… LinkedIn Discussion : SAO Group : 5/14/10

What one VC Panel says is “hot” this year… posted by Mark Lawler, VP, Technology at Thomson Reuters - Sabrix

A colleague of mine attended a panel discussion regarding VC funding in the Silicon Valley this past week. The panel consisted of Emergence Capital, Crosslink Capital, and Trident and William Blair (ibank).

I thought I’d share the highlights from the panel:

• SaaS is yesterday’s terminology. “Cloud” is now used as “SaaS 2.0”.

• Each firm made about 2-3 investments each year in 2008 and 2009. This year, most are on track for 8-12 investments.

• Anything that is not “cloud” in the technology community is “not getting funded”.

• Companies that received investment in 2008 and 2009 are over-valued – too many dollars chasing too few good deals. Same is true for 2010.

• VCs look for marketing and sales analytical rigor – cost of acquisition, retention/churn, lifetime value of a customer, incremental contribution margin per customer.

• Value customer segmentation: not enough to say you sell to the SMB (horizontal) – which part?

• Support annual contracts collected up front vs. quarterly or monthly – valued for the cash flow.

• Have evaluated the SaaS 1.0 companies and determined that they need more patience in building a company vs. capital efficiency.

• Looking for business processes that can only be automated thru the cloud. Ideally have a viral component.

• Looking for businesses that leverage the cloud (SFDC platform, Azure, etc.) – example of company that built on SFDC & immediately began selling to larger customers and having global customer access.

• Anything that can be viral in B2B – freemium model & WoM.

• M&A activity expected to accelerate in next 2 quarters as the SaaS 1.0 movers get enough momentum and resources to buy… examples were SFDC & SuccessFactors.

Best, Mark …”

Asked by simsboynton on May 16, 2010 Flag

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